Probate Deed of variation lost £14,000

Cafawin

Keep_pedalling said:

Cafawin said:

Keep_pedalling said:

You need to fill in all the gaps. I am assuming the DOV was on GM’s estate and that the CGT issue is with the sale of the house which had been transferred to the GC by the DOV but it is not that clear.

yes that is correct.  If the house went from GM to son and then GC £5000 IHT would be due to pay, using all nil band rates available.  So a deed of variation was done so house passed straight to GC and use nil bands.

But this changed the market value from £525k to £475k in the CGT.
I saved £5000 IHT but CGT increased by £14,000 resulting in £9000 loss.

House was sold for £675k

How exactly did this change the market value? Surely the value can’t be changed by a DOV.

If the house passed from son to grandchild the market value of £525k would be used.

The solicitor have confirmed this.
My query is that they did not tell me any information regarding CGT before I signed the DOV and now it can not be changed.  They had all relevant information but did not tell me.
They said they will ask HMRC to change the market value to the selling price, but I do not think this is possible.
I will need to use the legal ombudsman to claim back £9,000.
But I am looking after a grieving child atm.  This is one of the largest probate solicitors.

getmore4less

2018 then 2020  what months because the DOV on the GM estate would have needed to be done within 2years.

Who was living in the property after the GM died

Keep_pedalling said:

Cafawin said:

Keep_pedalling said:

You need to fill in all the gaps. I am assuming the DOV was on GM’s estate and that the CGT issue is with the sale of the house which had been transferred to the GC by the DOV but it is not that clear.

yes that is correct.  If the house went from GM to son and then GC £5000 IHT would be due to pay, using all nil band rates available.  So a deed of variation was done so house passed straight to GC and use nil bands.

But this changed the market value from £525k to £475k in the CGT.
I saved £5000 IHT but CGT increased by £14,000 resulting in £9000 loss.

House was sold for £675k

How exactly did this change the market value? Surely the value can’t be changed by a DOV.

The child would inherit at the 2018 valuation for CGT when sold.

Not clear who the OP is and if they are in the chain, they talk as if they are the ones losing but  don't make it clear if they are the child that owned the house at point of sale.

IF there were other assets in the GM estate  a DOV on them may have been more appropriate.

RAS

I think the OP might be the grandchild's parent or carer?

Marcon

Cafawin said:

Keep_pedalling said:

Cafawin said:

Keep_pedalling said:

You need to fill in all the gaps. I am assuming the DOV was on GM’s estate and that the CGT issue is with the sale of the house which had been transferred to the GC by the DOV but it is not that clear.

yes that is correct.  If the house went from GM to son and then GC £5000 IHT would be due to pay, using all nil band rates available.  So a deed of variation was done so house passed straight to GC and use nil bands.

But this changed the market value from £525k to £475k in the CGT.
I saved £5000 IHT but CGT increased by £14,000 resulting in £9000 loss.

House was sold for £675k

How exactly did this change the market value? Surely the value can’t be changed by a DOV.

If the house passed from son to grandchild the market value of £525k would be used.

The solicitor have confirmed this.
My query is that they did not tell me any information regarding CGT before I signed the DOV and now it can not be changed.  They had all relevant information but did not tell me.
They said they will ask HMRC to change the market value to the selling price, but I do not think this is possible.
I will need to use the legal ombudsman to claim back £9,000.
But I am looking after a grieving child atm.  This is one of the largest probate solicitors.

I'm not quite sure what input you are hoping for on this forum. Your solicitors have said they will do something and you've said you don't think it is possible - perhaps querying with them is the correct route to go, or waiting to see if it can be done in these particular circumstances?

You've already identified that you would have recourse to the Legal Ombudsman, so if the advice provides both incorrect and incapable of being remedied as your solicitors believe, that is indeed your remedy (although simply using the firm's formal complaints procedure may produce the same result in a much shorter timeframe).

EasySolution

When you make a Deed of Variation you have to make a positive selection whether or not you want the action to be read back for Inheritance Tax or not.?  Separately do you want the CGT value to be relevant from DOD or not?

It would appear that an inexperienced person has drafted the DofV and put you in this position.

Cafawin

Yes I agree. They said I haven't lost any money yet and will try to get HMRC to make a change, so I don't pay anything.
But they are gambling with my childs money without my permission.

I won't find out the result until 3 months later, when HMRC reply.

getmore4less

EasySolution said:

When you make a Deed of Variation you have to make a positive selection whether or not you want the action to be read back for Inheritance Tax or not.?  Separately do you want the CGT value to be relevant from DOD or not?

It would appear that an inexperienced person has drafted the DofV and put you in this position.

That's for the donor, gifting with a dov.

 This seems to be a retrospective DOV by the son(after death by executor) back to the GM estate.

Can that be done with value for CGT at a value at DOD of doner?

sammyjammy

Surely YOU haven't lost anything?

theoretica

Did you ask the solicitor for advice and what advice? Or did they just offer the suggestion?

theoretica

Thinking some more - the rise in value of the house between the DOV and sale was unknowable - and pushed the CGT into the higher bracket.  But at the time the CGT which would be due on the 50k price increase between the two deaths should have been taken into account. I make this out as smaller than 5k but not by much (may well be calculating wrongly) so should have been a known and considered liability at the time.